SUBJECT: Hermina Traeye Memorial Nursing Home

Petitioner,

Centers for Medicare and Medicaid Services

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Hermina Traeye Memorial Nursing Home (Hermina) appealed a March 29, 2001 decision by Administrative Law Judge (ALJ) Steven T. Kessel sustaining the determination by the Centers for Medicare and Medicaid Services (CMS) to terminate Hermina's participation in the Medicare program.⁽¹⁾ See Hermina Traeye Memorial Nursing Home, DAB CR757 (2001) (ALJ Decision). The ALJ Decision also reduced the civil money penalty (CMP) imposed on Hermina by CMS from $10,000 per day to $3,050 per day for each day of the period which began on April 23, 1999 and ended on May 15, 1999, for a new total of $70,150.⁽²⁾ CMS had imposed the remedies based on an April 1999 survey conducted by the South Carolina Department of Health and Environmental Control, the state survey agency for South Carolina, which found Hermina out of substantial compliance with 53 federal regulations, with 47 of the violations posing a risk of more than minimal harm, and with four deficiencies constituting immediate jeopardy to resident health and safety. (Two of the immediate jeopardy deficiencies were subsequently rescinded.)

The ALJ made five numbered findings of fact and conclusions of law (FFCLs), with lettered subfindings, relating to the April 1999 survey report. Before the ALJ, Hermina only challenged five of the deficiency findings, leading the ALJ to find initially that a basis existed to impose remedies, including termination, against Hermina on the more than 40 findings of substantial noncompliance made in the April 1999 survey that were established by CMS and not challenged by Hermina. ALJ Decision at 30. With respect to the deficiency findings that Hermina did challenge, the ALJ further found that he need not address the challenged findings assessed at less than the immediate jeopardy level because the unchallenged findings supported the termination and because the immediate jeopardy findings established the range of CMPs that could be assessed. The ALJ then addressed the challenged findings that were alleged to be at the immediate jeopardy level, concluding that substantial evidence in the record supported those findings, and that Hermina failed to show that CMS's findings of immediate jeopardy were clearly erroneous. Since the number and impact of immediate jeopardy findings were less than those alleged when CMS proposed a CMP of $10,000 per day, the ALJ reduced the CMP to $3,050 per day, the minimum amount set by regulation for a facility with an immediate jeopardy deficiency.

For the reasons discussed below, we conclude that there is substantial evidence in the record to support the ALJ's findings that Hermina was in violation of the infection control requirement set forth at 42 C.F.R. § 483.65(a), and that CMS's findings of immediate jeopardy were not clearly erroneous. Accordingly, we sustain the termination of Hermina's participation in the Medicare program and the imposition of a CMP in the amount of $70,150.

Standard of Review

Before the ALJ, the sanctioned facility must prove substantial compliance by the preponderance of the evidence, once CMS has established a prima facie case that the facility was not in substantial compliance with relevant statutory or regulatory provisions. See Cross Creek Health Care Center, DAB No. 1665 (1998), applying Hillman Rehabilitation Center, DAB No. 1611 (1997)(Hillman), aff'd, Hillman Rehabilitation Center v. United States, No. 98-3789(GEV), at 25 (D.N.J. May 13, 1999). The ALJ must uphold CMS's determination as to the level of noncompliance unless it is clearly erroneous. 42 C.F.R. § 498.60(c)(2).

Our standard of review on a disputed conclusion of law is whether the ALJ Decision is erroneous. See, e.g., Lake Cook Terrace Nursing Center, DAB No. 1745 (2000). Our standard of review on a disputed finding of fact is whether the ALJ Decision is supported by substantial evidence on the record as a whole. Id. The record here includes the record before the ALJ, the parties' submissions on appeal, and the transcript of a hearing held at the request of Hermina.

We have repeatedly held that the role of appellate review is not to substitute our evaluation of the evidence for that of the ALJ, but only to determine whether the factual findings made by the ALJ are supported by substantial evidence in the record as a whole. See Lake Cook Terrace Center, DAB No. 1745, at 6 (2000); Beverly Health and Rehabilitation - Spring Hill, DAB No. 1696, at 40 (1999).

Applicable Regulations

For purposes of surveys of skilled nursing facilities like Hermina, the regulations define "substantial compliance" as "a level of compliance with the requirements of participation such that any identified deficiencies pose no greater risk to resident health or safety than the potential for causing minimal harm." 42 C.F.R. § 488.301. "Immediate jeopardy" is defined as "a situation in which the provider's noncompliance with one or more requirements of participation has caused, or is likely to cause, serious injury, harm, impairment, or death to a resident." Id.

For deficiencies that constitute immediate jeopardy, a CMP in the range of $3,050 - $10,000 per day may be imposed. 42 C.F.R. § 488.438(a)(1) (1999). The factors to be taken into account in setting a CMP are listed at 42 C.F.R. § 489.438(f); we quote the regulation and discuss it below. Furthermore, a facility's provider agreement to participate in the Medicare and Medicaid programs may be terminated based on any failure by the facility to comply substantially with participation requirements regardless of whether immediate jeopardy is present. 42 C.F.R.
§ 488.456(b)(1)(I).

The ALJ Decision sustained those deficiencies relating to the requirement for infection control, set forth at 42 C.F.R.
§ 483.65:

The facility must establish and maintain an infection control program designed to provide a safe, sanitary, and comfortable environment and to help prevent the development and transmission of disease and infection.
(a) Infection control program. The facility must establish an infection control program under which it-
(1) Investigates, controls, and prevents infections in the facility:
(2) Decides what procedures, such as isolation, should be applied to an individual resident; and
(3) Maintains a record of incidents and corrective actions related to infections.

Factual Background

The ALJ Decision contains a full discussion of the background, which we summarize here. ALJ Decision at 2 - 3.

Hermina is a long-term care facility located on Johns Island, South Carolina. On April 19-23, 1999, the state survey agency conducted its annual survey of Hermina. CMS Ex. 2. The surveyors discovered serious problems in a number of areas, including pressure sore care, resident dignity and privacy, environmental hazards, medication errors, staffing, activities, and infection control. Based on this survey, the surveyors determined that Hermina was not in substantial compliance with Medicare participation requirements in 53 instances, with some of the deficiencies posing immediate jeopardy to the residents' health and safety. As stated above, Hermina did not contest more than 40 of these deficiencies before the ALJ.

On April 29, 1999, CMS notified Hermina that, as a result of the survey, it was imposing the following remedies: the denial of payment for new admissions, effective May 22, 1999; the termination of Hermina's Medicare and Medicaid provider agreements, effective May 16, 1999; and a CMP of $10,000 per day beginning April 23, 1999, and effective until jeopardy had been removed, substantial compliance achieved, or the termination of the provider agreements. CMS Ex. 3. The total CMP imposed was $230,000. On May 10, 1999 and May 14, 1999, Hermina submitted two plans of correction (POCs) that were both rejected by CMS. P. Ex. 3, at 95, 141. CMS then terminated Hermina's participation in the Medicare program on May 16, 1999.

The ALJ Decision

In his decision, the ALJ noted that Hermina challenged only five of the 53 findings of substantial noncompliance contained in the survey report, leaving more than 40 findings of substantial noncompliance unchallenged. ALJ Decision at 30. CMS presented evidence at the hearing, including testimony, in support of these deficiency findings. The ALJ specifically rejected Hermina's argument that the sole basis for CMS's determination to terminate Hermina's Medicare participation was the presence of immediate jeopardy level deficiencies, finding that the notices CMS sent Hermina stated that the determination to terminate was predicated on all of the deficiency findings made at the April 1999 survey. ALJ Decision at 31. The ALJ accordingly found that CMS was authorized to terminate Hermina based either on the presence of immediate jeopardy level deficiencies or the presence of other deficiencies which, while substantial, did not rise to level of immediate jeopardy. Id.

The ALJ Decision then proceeded to examine the deficiency finding allegedly constituting immediate jeopardy that was challenged by Hermina.⁽³⁾ The ALJ found that CMS established that Hermina did not comply substantially with 42 C.F.R. § 483.65(a)(1)-(3), the establishment of an effective infection control program, and that Hermina's residents were at immediate jeopardy as a result. ALJ Decision at 35 - 40. The ALJ found the testimony of CMS's expert witness, Dr. Holtz, an epidemiologist at the Infectious Diseases Division of the Centers for Disease Control, to be highly credible and persuasive about the need for a nursing facility to have an effective system for tracking infections, due to the susceptibility of the facility's residents to infections. Id. at 36 - 37. The ALJ discounted an alleged breach of contact isolation protocol involving one resident, but found that Hermina was deficient in identifying the source of another resident's infection. Id. at 36. Moreover, the ALJ found Hermina deficient in an overall failure to track infections among its residents, referring to the 1999 Infection Control Tracking Record maintained by Hermina as insufficient documentation to allow Hermina to perform adequate infection surveillance. As to another document, entitled Infection Surveillance Form, proffered by Hermina to show that it did have an effective infection control system in place, the ALJ found that this form was created after the April 1999 survey and completed in one sitting, and was thus not contemporaneous with events as they occurred. Id. at 39.

The ALJ nevertheless found that a CMP of $10,000 per day was unreasonable because Hermina's deficient conduct was substantially less egregious that CMS originally determined it to be, and accordingly reduced the CMP to $3,050 per day. The ALJ based this conclusion on the following: Hermina manifested two, and not four, immediate jeopardy level deficiencies, with one of the deficiencies (Tag 490) only a restatement of the other deficiency (Tag 441)--the manner in which it tracked infections among its residents--under a different regulation; and CMS based its determination to impose a CMP of $10,000 per day on Hermina's residents experiencing actual and severe harm, when in fact there was no evidence that the residents experienced actual harm as a consequence of the immediate jeopardy level deficiency that was established. ALJ Decision at 34, 40 - 42. The ALJ also found that he had no authority to reduce the CMP below $3,050 per day, the minimum upper range penalty, because of the presence of an immediate jeopardy level deficiency. ALJ Decision at 46.

Discussion

On appeal, Hermina raised six issues without tying its contentions to specific FFCLs in the ALJ decision. We have organized this decision to address these issues in the order in which they were raised by Hermina. We list in parentheses after the issue headings the FFCLs that appear relevant to each issue.

I. There is substantial evidence in the record to support the ALJ's findings that Hermina's infection control program was not in substantial compliance with 42 C.F.R. § 483.65(a) and that CMS was not clearly erroneous in deeming Hermina's deficiencies to be at the immediate jeopardy level. (FFCLs 4, 5, and 5a)

Hermina contended that the Tag 441 violation was based on isolated findings by the surveyors relating to two residents (Residents 4 and 21), and not any system-wide failure by Hermina in infection control. These two isolated events, Hermina argued, did not rise to the level of immediate jeopardy because "a determination of immediate jeopardy requires a crisis situation, a presently existing threat to health and safety that is observable while the surveyors are on site at the facility." Hermina Br. at 44. Hermina further contested the opinions of CMS's expert witness on the subject of infection control programs, contending that the witness was experienced only in hospital settings and lacked experience in nursing homes and nursing home regulations. As such, Hermina maintained, the ALJ should not have given any deference to the witness's opinions. Hermina particularly challenged CMS's criticism of its Infection Control Tracking Record as being inadequate to comply with the requirements of section 483.65(a) and the ALJ's finding that the lack of specificity in the Tracking Record constituted immediate jeopardy.

Hermina's assertions that it did not fail to observe infection control with respect to two patients and that such isolated failures, if any, do not amount to a deficiency are irrelevant, since the ALJ's decision rested principally on the overall failure to implement an effective infection control program. ALJ Decision at 36. As to that issue, Hermina's main criticism of the ALJ Decision is that the ALJ relied too heavily on CMS's expert witness, Dr. Holtz. The ALJ found the testimony of Dr. Holtz credible and persuasive. Our reading of the transcript of Dr. Holtz's testimony at the hearing provides no basis to question the validity of the ALJ's evaluation of the witness. Dr. Holtz testified extensively and knowledgeably about infection control programs and the necessity for a facility to maintain accurate records of infections among its resident populace. It is the hearing officer's, and not the Board's, responsibility to assess a witness's qualifications and credibility by listening in person to the witness's testimony and observing his demeanor. See South Valley Health Care Center, DAB No. 1691 at 32 (1999).

Moreover, the ALJ did not adopt Dr. Holtz's views as his own, but used this expert testimony to evaluate the documents Hermina introduced as evidence of its infection control program. Hermina had the burden to establish, after CMS established its prima facie case that Hermina failed to track residents with infections, that it did have an effective infection control program in place. The ALJ found that -

Petitioner had a duty to make reasonable efforts to find out the source of the resident [21]'s infection. There is no evidence that Petitioner made such efforts.

ALJ Decision at 36. Hermina offered two types of records to refute the surveyors' conclusion that it was not abiding with the requirements of section of 483.65(a), an Infection Control Tracking Record (P. Ex. 27, at 167 - 75) and an Infection Surveillance Form (P. Ex. 27, at 180 - 85). The ALJ evaluated both of these documents and made specific findings as to why they did not establish compliance with the regulations.

First, the ALJ found the Infection Control Tracking Record did not contain enough information to allow a facility to have an effective infection control program. Hermina did not provide any basis for us to overturn that conclusion.

Second, the ALJ evaluated Hermina's Infection Surveillance Form and found that it did not demonstrate that Hermina had an effective infection tracking system. The ALJ stated:

I would find that Petitioner overcame HCFA's prima facie evidence of failure by Petitioner to implement an infection tracking system were I to conclude that the Infection Surveillance Form was evidence of the state of Petitioner's infection tracking system as of the April 1999 survey.

However, I do not conclude that the Infection Surveillance Form is proof that Petitioner was effectively tracking infections as of the April 1999 survey. Petitioner has not shown that it actually was utilizing this form in April 1999. I infer from the appearance and contents of the form that it was created after completion of the April 1999 survey and reflects post-survey efforts by Petitioner to demonstrate that it was tracking infections.

The form was completed at one sitting. The April 1999 form was prepared no earlier than early May 1999. The entries on the form were not made contemporaneously with events as they occurred. I base my conclusion that the form was prepared in one sitting on the facts that all of the entries in the form are in the same handwriting and appear to have been made with same pen. [cites omitted] I base my conclusion that the form could not have been prepared sooner than early May 1999 on the fact that several of the entries in the April form are dated at the end of April 1999 and, in one instance, May 2, 1999. [cites omitted]

ALJ Decision at 39.

On appeal, Hermina did not dispute the ALJ's finding that this document was prepared after the April 1999 survey. We therefore conclude that there is substantial evidence to support the ALJ's determination that Hermina failed to substantially comply with the infection control regulation.

Having concluded that there was substantial evidence to support the ALJ's finding of a deficiency, we next review Hermina's contention that any deficiency that existed was not at an immediate jeopardy level. Clearly Hermina does not understand the regulatory meaning of immediate jeopardy. A finding of immediate jeopardy under the regulation does not require a finding of present harm, but also encompasses a situation that is "likely to cause" harm. 42 C.F.R. § 488.301. Thus, contrary to Hermina's arguments, "a crisis situation" or "a presently existing threat" is not required for a finding of immediate jeopardy. Where the State surveyors observe a situation such as the failure by a facility to determine the source of a resident's infection, as was the case with Resident 21 here, it reasonable for the surveyors to assume that the residents and other residents were placed at risk. The ALJ concluded, based on Dr. Holtz's testimony, that a failure to track infections would likely result in the spread of infectious organisms within Hermina's facility, and that residents likely would contract serious or life-threatening infections as a consequence.⁽⁴⁾ ALJ Decision at 37. Thus, there was ample evidence to support the ALJ's conclusion that CMS's determination that the deficiency placed Hermina's residents in immediate jeopardy was not clearly erroneous.

As stated above, our standard of review on a disputed finding of fact is whether the factual finding is supported by substantial evidence on the record as a whole. We find that there was indeed such evidence to support the ALJ's finding that Hermina was not complying with the participation requirements set forth at 42 C.F.R. § 483.65(a) at an immediate jeopardy level. We therefore affirm and adopt the challenged FFCLs.

II. The ALJ's determination that there existed a basis for the termination of Hermina's Medicare provider agreement was not erroneous. (FFCL 4, 4b, and 4c)

Hermina argued that the ALJ's decision to uphold a "fast-track" termination of its Medicare participation based on the surveyors' finding of immediate jeopardy level deficiencies was erroneous.⁽⁵⁾ Hermina re-asserted its position that there were no immediate jeopardy level deficiencies present and questioned the ALJ's position that CMS may terminate a facility based on any deficiency finding when CMS "almost never has imposed a fast- track termination for lower-level, non-immediate jeopardy deficiencies, except, apparently, where a provider exercises it right to appeal." Hermina Br. at 46 - 47. Hermina also argued that, because there was no re-visit of the facility, the POC was the only information available to the ALJ in determining Hermina's compliance and that that information alone is inadequate to presume continued noncompliance on Hermina's part.

Clearly, many of Hermina's contentions were premised on its beliefs that a finding of immediate jeopardy was unwarranted and that the immediate jeopardy deficiencies were the sole reason for CMS's imposition of termination. We have already found above that substantial evidence supported the ALJ's finding that Hermina's residents were in immediate jeopardy as a result of Hermina's deficient infection control program. In addition, as the ALJ stated, the notices sent to Hermina by CMS stated that the remedy was predicated on all of the deficiency findings, most of which Hermina did not challenge either legally or factually. ALJ Decision at 31-32. Moreover, the ALJ also was correct in holding that, even if there were no immediate jeopardy findings, the applicable regulations indeed permit immediate termination of a facility's provider agreement for any deficiency finding the facility out of substantial compliance, not just one that rises to immediate jeopardy. ALJ Decision at 5, citing Social Security Act §§ 1819(h)(2)(B)(ii), 1919(h)(3)(C)(ii), and 42 C.F.R. §§ 488.406(a)(3), 488.430; ALJ Decision at 31; Beverly Health & Rehabilitation-Springhill, DAB No. 1696 (1999). An alleged policy of CMS to pursue fast-track termination only where immediate jeopardy is established does not overcome the plain language of the statute and regulations.

Hermina's assertion that the ALJ erred in finding that the deficiencies still existed on the date of termination is also based upon an unsound premise. Under the regulations, the mere submission of a POC did not establish that any cited deficiencies had been corrected. The duration of remedies is governed by 42 C.F.R. § 488.454. That regulation provides that remedies will continue until "[t]he facility has achieved substantial compliance, as determined by HCFA or the State based upon a revisit or after an examination of credible written evidence that it can verify without an on-site visit." 42 C.F.R. § 488.454(a). The regulation additionally provides:

If the facility can supply documentation acceptable to HCFA or the State survey agency that it was in substantial compliance and was capable of remaining in substantial compliance, if necessary, on a date preceding that of the revisit, the remedies terminate on the date HCFA or the State can verify as the date that substantial compliance was achieved and the facility demonstrated that it could maintain substantial compliance, if necessary.

42 C.F.R. § 488.454(e).

Here, all that Hermina offered as proving that it was in substantial compliance was the POC it submitted. That POC, however, was never found acceptable by CMS because it did not allege that the facility had now achieved substantial compliance. The AlJ properly concluded that he lacked authority to adjudicate the question of whether HCFA abused its discretion in deciding to reject the POC, citing 42 C.F.R. § 488.456(b)(1)(ii). Finally, although the ALJ stated that the Infection Surveillance Form might have demonstrated substantial compliance with the infection control regulation in April had it been completed timely, submission of that form alone did not demonstrate compliance at a later date, since the POC submitted after the form had been completed alleged compliance through development of "new forms to enable appropriate tracking of residents with infections." See ALJ Decision at 39, citing 595 P. Ex. 13, at 25. Accordingly, we find that the ALJ correctly held that, because there was no evidence that Hermina had corrected its deficiencies, there was a basis for imposition of termination.

We therefore affirm and adopt the ALJ's FFCLs challenged by Hermina under this issue.

III. The ALJ properly concluded that Hermina's financial condition was not a basis for reducing the CMP imposed as a result of the April 1999 survey. (FFCL 8)

Hermina maintained that the ALJ erred in imposing a CMP of $3,050 per day because CMS failed to consider Hermina's financial condition and survey history, prior to its decision to impose a CMP. Hermina contended that due to CMS's failure to provide notice of its reasoning underlying the imposition of CMPs, as required by the regulation, the ALJ should have refused to impose any CMP.

The following factors are to be taken into account in determining the amount of a CMP:

(1) The facility's history of non-compliance, including repeated deficiencies.
(2) The facility's financial condition.
(3) The factors specified in § 488.404 [the seriousness, scope, and number of deficiencies found].
(4) The facility's degree of culpability. Culpability for purposes of this paragraph includes, but is not limited to, neglect, indifference, or disregard for resident care, comfort or safety. The absence of culpability is not a mitigating circumstance in reducing the amount of the penalty.

42 C.F.R. § 488.438(f).

Before the ALJ, prior to the hearing, Hermina had sought dismissal of CMS's remedy determination on the grounds that CMS's written notice of the imposition of remedies failed to comply with the regulatory requirements set forth at 42 C.F.R. § 488.434 because it did not explain the reasons for CMS's determination to impose a CMP in the amount of $10,000 per day.⁽⁶⁾ The ALJ ruled that the notice CMS sent did satisfy "the minimum requirements of the regulation" as --

the regulation does not require HCFA to explain how it weighs the factors in determining the amount of a civil money penalty. It merely requires HCFA to tell a facility that it considered those factors.

August 14, 2000 Rulings on Petitioner's Motions at 3. While the ALJ acknowledged that the notice failed to provide Hermina with a meaningful explanation as to how the amount of CMP was determined, the ALJ stated that this was not a fatal defect, because the hearing afforded Hermina was a de novo proceeding. Consequently, the ALJ was not bound by CMS's determination as to the amount of the CMP, but rather had the authority to determine the reasonableness of the CMP based on the evidence presented that pertained to the factors set forth in section 488.438(f). Id. at 3 - 4.

The ALJ Decision further considered Hermina's arguments that CMS failed to consider its financial condition in determining the amount of the proposed CMP and that the proposed CMP was unreasonable in light of Hermina's actual financial condition. The ALJ rejected Hermina's suggestion that, in light of CMS's failure to take Hermina's actual financial condition into consideration prior to issuing the notice, the appropriate remedy for the ALJ to impose was the minimum CMP of $50 per day. The ALJ stated:

The possibility that evidence offered by Petitioner as to its financial condition was not fully reviewed by HCFA is not a relevant consideration in deciding the amount of civil money penalties to be imposed if I give Petitioner the opportunity to present such evidence as part of its case before me. My authority to hear and decide these cases is de novo. My obligation is to review evidence independently from what HCFA may have done with that evidence and to make my own decision as to appropriate civil money penalty amounts. Here, each side was given the opportunity to present evidence for de novo consideration.

ALJ Decision at 45. The ALJ further stated that he had substantially reduced the amount of the CMP, from $10,000 per day to $3,050 per day, and that he did not have the authority to reduce the CMP any further as the regulations require a minimum CMP of $3,050 per day where there is an immediate jeopardy level deficiency involved, even where a facility's financial condition might otherwise warrant further reduction of the penalty amount. Id. at 46. The ALJ declared that he therefore had no authority to consider Hermina's argument that it might be forced into bankruptcy if it were required to pay the full CMP amount CMS determined to impose.

On appeal, Hermina essentially repeated the arguments that were rejected by the ALJ. Hermina alleged that the ALJ's conclusion that a CMP should be imposed violated the Social Security Act (Act), due process, and basic administrative law. Hermina argued that, under the Act, CMS was obliged to take into account Hermina's financial condition before CMS elected to impose a CMP, and that its failure to do so meant that dismissal was required. Hermina maintained that the ALJ's conclusion that he could remedy CMS's failure to consider Hermina's financial condition at the hearing improperly let CMS escape its obligation to consider each factor in section 488.438(f) and communicate to the facility the factual and logical basis for its decision regarding the imposition of remedies. Hermina questioned whether it actually received a de novo review from the ALJ, given the ALJ's assertion that his de novo review rendered Hermina's due process notice concerns irrelevant because he could consider the matter himself and then his declaration that he did not have discretion to lower the CMP below $3,050 per day. Citing various Board decisions, Hermina concluded that the CMP must be reduced to $50 per day. Hermina Br. at 64.

Hermina's position that it was somehow handicapped by not receiving in the notice of penalties a more detailed explanation of how CMS reached its determination of the CMP amount is simply not tenable. As the ALJ ruled, there is no statutory or regulatory requirement for CMS to detail how it weighed the factors set forth in section 488.438(f) in determining a CMP amount. August 14, 2000 Rulings on Petitioner's Motions at 3; see also Careplex of Silver Spring, DAB No. 1683, at 28 -29 (1999). Moreover, the suggestion that an ALJ should examine how CMS weighed these factors was explicitly rejected by the Board in Emerald Oaks, DAB No. 1800 (2001):

[O]ur decisions, and the regulations, do not require an ALJ to make any finding concerning how CMS exercised its discretion in selecting a remedy or setting the amount of a penalty.

At 11. The Board stated further:

[T]he purpose of the hearing was not to determine whether CMS followed the correct procedure in determining to impose a CMP or setting the amount of the CMP. The hearing at the ALJ level in such cases is intended to determine two fundamental questions: (1) whether a basis existed to support the imposition of the CMP under the governing statutory and regulatory authorities, and (2) whether the amount of CMP fell within a reasonable range based on the applicable law. The ALJ resolves these issues de novo in the sense that the determination is based on the evidence as it is developed before the ALJ and not on how CMS evaluated the evidence as it stood at whatever point CMS made its assessment.

At 13.

Our review of the record shows the ALJ afforded Hermina the opportunity at the hearing to present evidence of its financial condition. Hermina had months to prepare its case. Both CMS and Hermina produced documentation and put on witnesses to testify about the financial condition of Hermina and its parent company, including the value of its real estate holdings and its ability to pay a CMP. Any arguable due process harm that Hermina might have incurred from a "faulty" CMS notice was effectively cured by the hearing.

Furthermore, we find that Hermina was in no way prejudiced by CMS's failure to provide Hermina with a more detailed accounting of the factors it considered in arriving at a proposed CMP amount. As the ALJ pointed out, Hermina's financial condition in the end played absolutely no role in the determination of the CMP ultimately imposed on Hermina. Neither CMS's assertion that Hermina had the resources to pay the CMP nor Hermina's claims that paying the CMP would force it into bankruptcy had any effect on the ALJ's determination of the CMP amount. Above, we found that there was substantial evidence to support the ALJ's finding that Hermina was not in substantial compliance with the requirement for infection control, a deficiency at the immediate jeopardy level. As such, the regulatory minimum penalty Hermina could have received was a per day CMP of $3,050. Below, we discuss and affirm the ALJ's determination that he is bound by all applicable regulations. Thus, the ALJ could not have reduced the CMP to any lower amount. We therefore affirm and adopt FFCL 8.

IV. The ALJ properly held that a basis existed for the imposition of both remedies proposed by CMS. (FFCL 4)

Hermina asserted that the ALJ erred in upholding the imposition of both a termination and a CMP because the CMP was not imposed to serve a remedial purpose as required by 42 C.F.R. § 488.402(a) ("The purpose of remedies is to ensure prompt compliance with program requirements"). Hermina argued that CMS's imposition of a CMP here was not intended to serve a remedial purpose as shown by CMS's simultaneous pursuit of a fast-track termination of Hermina and its refusal to revisit the facility to confirm the status of corrective measures taken after the April 1999 survey. Hermina maintained that these actions demonstrated that CMS was not concerned for the welfare of Hermina's residents, but "merely acting as a bully." Hermina Br. at 67.

We find Hermina's position unpersuasive. Hermina appears to be arguing that CMS cannot impose a CMP if it is also seeking termination of a facility. Section 1819(h) of the Act, however, specifically permits the Secretary to seek multiple remedies, including termination and the imposition of a CMP, against a facility found noncompliant with program requirements. The Board has upheld ALJ decisions that sustained both a termination of a facility and the imposition of a CMP. See, e.g., Beverly Health and Rehabilitation - Spring Hill, DAB No. 1696 (1999).

As discussed above, Hermina had the opportunity to reduce the amount of CMP and avoid termination by bringing itself into compliance and submitting an acceptable POC to CMS as soon as possible. The remedial purpose of the CMP sanction would have been achieved if Hermina had been able to demonstrate that the deficiencies that had been the basis for the imposition of the CMP had been rectified. The POCs submitted by Hermina were found not to be acceptable, however, because they did not allege that all of the deficiencies had been corrected. CMS or the state survey agency was therefore under no obligation to revisit Hermina in the absence of an acceptable POC, and the per day CMP thus continued to accumulate.

V. The ALJ's imposition of a per day CMP for each day until Hermina was terminated was not erroneous. (FFCL 4a, 4c)

Hermina argued that the ALJ's imposition of an immediate jeopardy level CMP for each day until Hermina was terminated from the Medicare program was erroneous, because CMS failed to establish that immediate jeopardy existed on each day after the April 1999 survey. Hermina contended that the deficiencies found in the April 1999 survey cannot be presumed to have continued to exist unless a revisit was made to determine the status of the deficiencies. Hermina asserted there were no findings that deficiencies existed after the state surveyors exited the facility after the April survey.

Hermina, however, cited no authority for this argument, which we find totally without merit. As discussed above, Hermina was mistaken about the responsibilities of the parties once deficiencies are found at a nursing facility. The burden is on the facility to prove that it has resumed complying with program requirements, not on CMS to prove that the deficiencies continued to exist after they were discovered. The facility must submit a POC which addresses the deficiencies. 42 C.F.R. § 488.408(f). Moreover, the Board has held that "[e]ven if the plan of correction is accepted, the facility is not regarded as in substantial compliance until HCFA determines, usually through a revisit survey, that the deficiency no longer exists." Cross Creek Health Care Center, DAB No. 1665, at 3 (1998). Since the POC was deemed unacceptable, CMS never directed the state survey
agency to resurvey Hermina and thus never determined that the deficiency arising from Hermina's infection control procedures ceased to exist. Accordingly, the remedies imposed as a result of the survey, including a CMP, continue to be in force until such time as the facility is found to be in compliance again. There was no error on the ALJ's part in finding that a CMP should be imposed on Hermina while it was not complying with program requirements.

VI. The ALJ was correct in concluding that he lacked authority to rule on the constitutionality and/or validity of applicable statutes and of regulations adopted by the Secretary. (Decision section IIA)

Hermina contended that the ALJ's conclusion, made in his prehearing rulings, that he lacked authority to rule on its motion to dismiss the CMP because of CMS's alleged use of an unlawful survey process was erroneous. Hermina had argued before the ALJ that CMS's survey process did not conform with the due process requirements of the Constitution and the rulemaking procedures of the Administrative Procedure Act (APA). Hermina had contended that the survey protocol used by the South Carolina State survey agency, published by CMS at Appendix P to CMS's State Operations Manual, was not published pursuant to the notice and comment rulemaking requirements of the APA, and that the survey protocol utilized unlawfully substituted for the survey protocol published at Subpart C of 42 C.F.R. Part 488. Hermina had maintained that any action taken by CMS, including termination and the imposition of a CMP, that was based on an illegal survey protocol was itself unlawful, and a violation of the due process clause of the Constitution.

In a prehearing ruling, the ALJ determined that he lacked authority to decide such matters:

I deny this motion because I have no authority to hear and decide it. In denying the motion I reach no conclusion as to its merits. My authority to decide these cases and other cases involving HCFA is limited to that which has been delegated to me by the Secretary of this Department. The Secretary has not delegated to me the authority to declare her actions to be ultra vires or unconstitutional.

August 14, 2000 Rulings on Petitioner's Motions at 2.

On appeal, Hermina argued that the ALJ erred in ruling that he could not address the arguments raised by Hermina seeking to invalidate the survey process as ultra vires or unconstitutional. Hermina maintained that "ALJs decide routinely that they have the authority to decide which laws to apply." Appeal br. at 68.

We find that the ALJ committed no error in ruling that he lacked the authority to consider Hermina's constitutional arguments. The Board has previously addressed the issue of an ALJ's and the Board's authority to rule on challenges to the constitutionality of statutes and regulations, in Sentinel Medical Laboratories, Inc., DAB No. 1762, at 9 (2001):

It is well established that administrative forums, such as this Board and the Department's ALJs, do not have the authority to ignore unambiguous statutes or regulations on the basis that they are unconstitutional. A legislative rule is binding on the agency that issues it. 1 Kenneth Culp Davis and Richard J. Pierce, Jr., Administrative Law Treatise, § 6.5 (3^rd ed. 1994), citing U.S. v. Nixon, 418 U.S. 683 (1974) (where the court noted that the executive branch was bound by the terms of a regulation it had issued, even though it was within its power to change that regulation). Federal courts have refused "to recognize in administrative officers any inherent power to nullify legislative [or executive] enactments because of personal belief that they contravene the [C]onstitution." Gibas v. Saginaw Mining Co., 748 F.2d 1112, at 1117 (6^th Cir. 1984) (citation omitted). Thus, courts have noted that challenges to the constitutionality of an agency regulation lie outside the cognizance of that agency, and that generally, an ALJ is bound by the regulations promulgated by his administrative agency. Howard v. FAA, 17 F.3d 1213, 1218 (9th Cir. 1994); Stieberger v. Heckler, 615 F.Supp. 1315, 1386 (S.D.N.Y. 1985), citing D'Amico v. Schweiker, 698 F.2d 903 (7th Cir. 1983). Challenges to the constitutionality of a statute or a regulation promulgated by an agency are generally beyond the power or the jurisdiction of an agency. Gilbert v. National Transportation Safety Board, 80 F.3d 364, at 366-67 (9^th Cir. 1996); Howard v. FAA, supra.

For the same reasons, we uphold the ALJ's determination regarding his authority in this case.

To the extent that the ALJ failed to address Hermina's arguments concerning the validity of the survey process used by the state survey agency in makings its findings of deficiency, we find that omission to be harmless error for two reasons. First, any alleged defect in the survey procedures is not grounds for dismissal of the remedies against Hermina, because it is the findings of Hermina's noncompliance with the substantive requirements of 42 C.F.R. Part 483 -- the majority of which Hermina did not dispute -- that are the bases of the remedies imposed upon it. How those deficiencies were discovered is irrelevant so long as Hermina had notice of and a fair opportunity to contest them.

Second, the Board addressed and rejected the argument that a facility survey was flawed on APA grounds because the state survey agency improperly relied on the protocol set forth in Appendix P of CMS's State Operations Manual rather than the survey protocol set forth in the regulations at Subpart C of 42 C.F.R. Part 488 in Golden State Manor and Rehabilitation Center, DAB No. 1597 (1996). There the Board discussed in extensive detail how the Subpart C process was rendered inapplicable by the Omnibus Budget Reconciliation Act of 1987 and how the State Operations Manual provided the only appropriate survey guidelines for State survey agencies. Golden State at 15 - 23. The Board explicitly found that use of the State Operations Manual involved no violation of APA requirements. Id. at 22 - 23. CMS cited that case as controlling in its response to Hermina's appeal before the Board, but Hermina has not offered any convincing arguments that our reasoning in Golden State should not be followed in this case. We therefore reject this Hermina challenge to the remedies imposed upon it.

Conclusion

For the reasons discussed above, we sustain Hermina's termination from the Medicare program and the imposition of a CMP of $70,150, representing $3,050 per day for the period beginning on April 23, 1999 and ending on May 15, 1999. In doing so, we affirm and adopt all the FFCLs made by the ALJ.

Cecilia Sparks Ford

Donald F. Garrett

M. Terry Johnson
Presiding Board Member

1. CMS was previously named the Health Care Financing Administration (HCFA). See 66 Fed. Reg. 35,437 (July 5, 2001). We use "CMS" in this decision unless we are quoting from documents that refer to HCFA.

2. The ALJ Decision also resolved another remedy imposed on Hermina by CMS in 1998; the cases were consolidated at the request of Hermina and CMS. In Docket No. C-99-195, Hermina appealed CMS's determination to impose a CMP of $450 per day for the period which began on June 4, 1998, and ended on August 20, 1998. The ALJ Decision reduced the CMP to $250 per day for that period, for a total CMP of $19,500. Hermina elected not to appeal that part of the ALJ Decision.

3. Four other deficiency findings in the April 1999 survey (Tags 241, 248, 252, and 314), all involving non-immediate jeopardy findings, were expressly challenged by Hermina at the hearing. The ALJ, however, found that it was unnecessary for him to resolve these deficiencies because: CMS would have a basis to impose remedies against Hermina, including termination, whether or not Hermina was deficient under these tags as Hermina was not complying substantially with more than 40 other participation requirements, with two deficiencies at the immediate jeopardy level; the presence or absence of lower range deficiencies would not affect the ALJ's finding that $3,050 per day was the reasonable amount of CMP appropriate here; and the decision to impose a CMP of $3,050 per day took into consideration the seriousness of the immediate jeopardy level deficiencies that Hermina manifested, with no remedial purpose served by increasing the CMP beyond that amount. ALJ Decision at 42 - 44. Hermina challenged the ALJ's statement that CMS could base its termination decision on the presence of non-immediate jeopardy deficiencies (an issue that we discuss later in our decision), but it did not take exception to his failure to resolve the non-immediate jeopardy deficiencies that Hermina had appealed.

4. Hermina alleged that Dr. Holtz "admitted that Hermina did not appear to have an infection control problem in 1999, and . . . admitted that hand washing was more important in reducing the spread of infections than the kind of tracking program a facility might adopt." App. Br. at 12. Hermina, however, failed to give the source of this alleged statement by Dr. Holtz. Our review of the transcript did not discover any statement by Dr. Holtz that had the meaning ascribed by Hermina.

5. The regulations provide that a facility with deficiencies that pose immediate jeopardy to residents' health or safety will have their provider agreements terminated within 23 days unless corrections are made, while if the deficiencies are at a less than immediate jeopardy level, CMS may either terminate the facility's provider agreement immediately or may allow the facility to participate for no longer than six months if the facility submits an acceptable a plan of corrections. See 42 C.F.R. §§ 488.410; 488.412. If deficiencies are not corrected within 6 months of the last day of the survey, termination is mandatory. 42 C.F.R. § 488.412(d). Thus, terminations without the opportunity to correct deficiencies are termed "fast-track" terminations.

6. That regulation, in pertinent part, states that a notice of remedy involving a CMP will include a recitation of --

[a]ny factors specified in § 488.438(f) that were considered when determining the amount of the penalty; . . .

42 C.F.R. § 488.434(a)(2)(iv).